Vietnam expects to boost exports with VAT refund scheme

Vietnam now has the great opportunity of earning billions of dollars a year more from exports thanks to the value added tax (VAT) immunity policy applied to the foreigners and overseas Vietnamese passing through the country's two biggest airports.

Deputy General Director of the General Department of Customs Hoang Viet Cuong has said that taxation bodies, customs agencies, treasuries, the two chosen commercial banks and enterprises have been making hectic preparations for the implementation of the pilot plan on refunding VAT to foreigners.

From July 1, 2012, the people who leave the country will be reimbursed 85 percent of the VAT they have paid. The remaining 15 percent of the refund value will be used as service fees to pay banks that handle tax repayments.

Cuong said that the tax refund to foreigners upon their exit has been implemented in the world for the last tens of years. However, Vietnam can only carry out the tax refund at this moment.

In the immediate two years, commencing from July 1, 2012, the tax refund would be applied only to foreigners and Vietnamese people, who settle down in foreign countries and show entry-exit documents granted by foreign countries at the two international airports of Noi Bai in Hanoi and Tan Son Nhat airports in HCM City.

Also according to Cuong, if the pilot program runs smoothly, Vietnam would not have to wait two years as previously planned to begin applying the scheme in a large scale. By that time, the tax refund scale would be enlarged, and the tax refund would be carried out at many international border gates - the air, road and sea border gates.

However, experts have warned that it would be very difficult to implement the tax refund because of the large number of people subject to the tax refund, with the number of foreign tourists to Vietnam increasing rapidly by 15-20 percent per annum.

Besides, the tax refund would need the close cooperation among relevant branches including customs agencies, treasuries, taxation bodies, banks and enterprises.

In the immediate time, customs agencies would take the initiative in cooperating with relevant branches to build up the customs examination and reimbursement procedures and set up necessary regulations, to ensure that the formalities would not cause inconvenience to foreigners.

Nevertheless, Cuong admitted that there always exists a big gap between the will and the implementation. Even the countries with developed economies which have been carrying out the tax refund scheme for the last tens of years such as South Korea, the US or Germany, troubles still occur.

The General Department of Customs has estimated that with six million foreigners traveling to Vietnam (in 2011), and each of them buys the goods worth 200-300 dollars, Vietnam’s export turnover would increase by 1.5 billion dollars at least.

“The number of foreign tourists to Vietnam increases by 15-20 percent year on year. Therefore, the turnover of the exports through hand luggage would be relatively big,” said Lo Thi Nhu from the customs department.

Especially, the new policy would help develop tourism and encourage the development of many relating economic fields.

The enterprises to be chosen to sell free-duty goods to foreigners would be able to enjoy big interests. Especially, they can seek bigger profits thanks to boosting sales to foreign tourists.

In order to be chosen to sell duty-free goods, enterprises just need to have head quarters or branches, shops or agents located in Hanoi, HCM City or the handicrafts villages which are the key points in the tour routes.

Despite a lot of benefits, Vu Van Truong, Deputy General Director of the General Department of Taxation, said not many enterprises want to join the pilot program.

“As businesses anticipate the complicated procedure and technique in selling duty free goods, they would listen to the news before making decision,” Truong said.